TIDMCRE
RNS Number : 6476Z
Conduit Holdings Limited
17 May 2023
Pembroke, Bermuda - 17 May 2023
Conduit Holdings Limited
("CHL" LSE ticker: CRE)
First Quarter 2023 Trading Update
Gross premiums written increased by 59.1%
Year-to-date overall risk-adjusted rate change, net of claims
inflation, of 19.0%
CHL, the ultimate parent company of Conduit Re, a pure-play
Bermuda-based reinsurance business, today presents its trading
update for the first quarter of 2023.
Trevor Carvey, Chief Executive Officer, commented: "The
imbalance between supply and demand continues in the marketplace
and Conduit Re has seen a very strong first quarter both in terms
of premium growth and the rating levels seen across our target
classes. April business renewed through strongly and we continue to
dial our book deliberately towards the property and specialty
classes where the market environment is considered most favourable.
The overall signs are that pricing momentum will be maintained into
the important mid-year renewals, and our highly scalable and lean
operating model has created a platform for strong future
growth."
Trading
-- $443.2 million of estimated ultimate premiums written for the
three months ended 31 March 2023, a 50.7% increase on the three
months ended 31 March 2022
-- Overall portfolio risk-adjusted rate change for the first
quarter of 2023, net of claims inflation, of 19.0%
-- Gross premiums written for the three months ended 31 March
2023 of $278.0 million, a 59.1% increase from the first quarter of
the prior year
-- Despite an active natural catastrophe quarter of losses for
the industry, no major event loss, individually or in aggregate,
had an outsized or material impact on Conduit Re
-- High quality investment portfolio:
- Average credit quality of AA; investment return 1.8%, book yield 2.8%, market yield 5.0%
- Unrealised gain of $12.5 million compared to unrealised loss
of $32.6 million in the first quarter of 2022
- Short portfolio duration of 2.4 years; opportunity to reinvest
at higher interest rates remains
-- Final dividend of $0.18 (14.73 pence) per common share in
respect of 2022 was paid on 21 April 2023
-- $132.6 million of estimated ultimate gross premiums written
during the April renewals, bringing estimated ultimate gross
premiums written to $575.8 million from 1 January to 30 April
2023
Outlook
-- Market conditions remain very favourable with property and
specialty leading the way ahead of casualty driven by:
- Fundamental re-pricing of risk and growing demand for
reinsurance while supply remains constrained
- Continuing risk-adjusted rate increases, augmented by improvements in terms and conditions
- Enduring momentum into April, ahead of the mid-year renewals
-- Conduit Re will continue prioritising the most attractive
classes of business within an exceptional, sustainable pricing
environment, accelerating its trajectory towards a mid-80s combined
ratio and benefiting from:
- Retrocession protection in place - purchased early in the year
to support growth strategy and ensure certainty of cover
- Legacy-free balance sheet and a healthy excess capital position
- Highly efficient underwriting platform: low other operating
expense ratio of 7.1% for the full year 2022
Neil Eckert, Executive Chairman, commented: "As the year
progresses, the capacity constraint in the market becomes
increasingly acute. We see this as an enduring pricing environment,
creating the opportunity for improved margins in our business
throughout 2023 and beyond. Conduit continues to deliver strong
year-on-year growth. Our current ultimate premium growth is ahead
of the original five year IPO plan expectations and the true value
of our strong balance sheet is becoming more apparent as time
passes."
Underwriting update
During the first three months of 2023, Conduit Re continued to
show growth across all segments, benefiting from new business, high
retention and underlying growth of our renewal business and
improving rates. Client count and submission flow have increased in
line with Conduit Re's strategy, with the embedded renewing
portfolio providing the key foundations.
Premiums
Estimated ultimate premiums written1 for the three months ended
31 March:
2023 2022 re-stated Change Change 2022 Published2
Segment $m $m $m % $m
Property 205.7 120.5 85.2 70.7% 120.8
Casualty 110.7 99.0 11.7 11.8% 99.0
Specialty 126.8 74.6 52.2 70.0% 77.1
Total 443.2 294.1 149.1 50.7% 296.9
----------- ------ --------------- ------- ------- ----------------
Gross premiums written3 for the three months ended 31 March:
2023 2022 re-stated Change Change 2022 Published4
Segment $m $m $m % $m
Property 159.0 83.6 75.4 90.2% 83.8
Casualty 64.9 59.7 5.2 8.7% 59.7
Specialty 54.1 31.4 22.7 72.3% 34.0
Total 278.0 174.7 103.3 59.1% 177.5
----------- ------ --------------- ------- ------- ----------------
Pricing
Pricing levels and terms and conditions continued to improve in
the first quarter of 2023 and we were presented with an increasing
number of opportunities to deploy our capital into the areas and
products that we target. The non-catastrophe elements of both
property and specialty are providing ongoing opportunities for
selective growth, with the property catastrophe renewals in Japan
and Europe also showing reasonable rate strengthening in April,
which enabled us to expand our footprint there.
Casualty treaty pricing is adequate, although less buoyant, and
we continue to track and monitor the approach of our core clients'
portfolios in their local markets. Casualty net rate change, after
the impact of terms and conditions, remains broadly on par with the
underlying inflation-adjusted claims expectations.
Conduit Re's overall risk-adjusted rate change for the three
months ended 31 March 2023, net of claims inflation, was 19%, and
by segment was:
Property Casualty Specialty
39% 1% 14%
Losses
Despite an active quarter for natural catastrophe losses for the
industry, there were no major event losses individually or in
aggregate which had a material impact on Conduit during the first
quarter of 2023.
Our ultimate loss estimates, net of reinsurance and
reinstatement premiums, for the previously reported 2022 loss
events remain stable. The estimated ultimate losses for Hurricane
Ian and the ongoing conflict in Ukraine are in line with previously
announced estimates. There were also no material changes to the
previously reported 2021 loss events.
Our loss and reserve estimates have been derived from a
combination of reports and statements from brokers and cedants,
modelled loss projections, pricing loss ratio expectations and
reporting patterns, all supplemented with market data and
assumptions. We will continue to review these estimates as more
information becomes available.
Investments
In line with our stated strategy, we continue to maintain our
conservative approach to managing our invested assets with a strong
emphasis on preserving capital and liquidity. Our strategy remains
maintaining a short duration, highly-rated portfolio, with due
consideration of the duration of our liabilities. Our investment
portfolio does not hold any derivatives, equities, alternatives or
emerging market debt. Contingent convertibles are not permitted by
our investment guidelines. We also have issuer restrictions in
place which limit our exposure to any one credit. We do not have
any investments in Silicon Valley Bank, Signature Bank, Credit
Suisse AT-1s or First Republic Bank.
The portfolio returned 1.8% during the first quarter of 2023
driven primarily by the reduction in treasury yields, which more
than offset the modest widening of credit spreads during the
quarter. This resulted in an unrealised gain of $12.5 million on
the investment portfolio for the quarter. In the first quarter of
2022 treasury yields increased significantly, which led to an
unrealised loss of $32.6 million. The return for that quarter was
(2.9)%.
While we expect market volatility to remain elevated in the near
term, Conduit expects to be able to reinvest at higher rates as the
existing portfolio rolls over.
The breakdown of the managed investment portfolio is as
follows:
As at 31 March 2023 As at 31 March 2022
--------------------------- -------------------- --------------------
Fixed maturity securities 91.5% 95.6%
Cash and cash equivalents 8.5% 4.4%
Total 100.0% 100.0%
--------------------------- -------------------- --------------------
Key investment portfolio statistics for our fixed maturities and
managed cash were:
As at 31 March 2023 As at 31 March 2022
---------------- -------------------- --------------------
Duration 2.4 years 2.5 years
Credit quality AA AA-
Book yield 2.8% 1.1%
Market yield 5.0% 2.5%
---------------- -------------------- --------------------
Capital & dividends
Total capital and tangible capital available was $0.82 billion
as at 31 March 2023.
During the first quarter of 2023, CHL's Board of Directors
declared a final dividend of $0.18 (GBP0.1473) per common share in
respect of 2022, which was paid in pounds sterling on 21 April 2023
to shareholders of record on 24 March 2023, resulting in an
aggregate payment of $29.6 million.
In accordance with authority granted at CHL's AGM held on 13 May
2021, and renewed on May 11, 2022, CHL has exercised its authority
to purchase its own shares, repurchasing a total of 757,823 common
shares. As announced at the time the repurchases commenced in
December 2021 and subsequently, the shares were repurchased to meet
future obligations under Conduit's variable incentive schemes. On
or about 16 May 2023 CHL transferred 757,823 common shares at
nominal value to the CHL employee benefit trust established in
connection with the equity incentives granted to executives and
employees of CHL and its subsidiaries.
Webcast
Conduit's management will host a virtual meeting for analysts
and investors via a webcast and conference call on Wednesday, 17
May 2023 at 12.00 noon UK time / 8.00 am Bermuda time.
To access the webcast, please register in advance here:
https://www.lsegissuerservices.com/spark/ConduitHoldingsLtd/events/9174564f-d6bf-4d42-b04f-e62d17cf4de7
To access the conference call, please register to receive unique
dial-in details here:
https://services.choruscall.za.com/DiamondPassRegistration/register?confirmationNumber=9420770&linkSecurityString=17bde90b90
A recording of the conference call will be made available later
in the day on the Investors section of Conduit Re's website at
www.conduitreinsurance.com.
Media contacts
H/Advisors Maitland - Vikki Kosmalska / Alistair de
Kare-Silver
+44 (0) 207 379 5151
conduitre@h-advisors.global
Investor relations and other enquiries:
info@conduitreinsurance.com
Panmure Gordon (UK) Limited (Joint Corporate Broker)
+44 (0) 207 886 2500
Berenberg (Joint Corporate Broker)
+44 (0) 203 207 7800
Peel Hunt (Joint Corporate Broker)
+44 (0) 207 418 8900
About Conduit Re
Conduit Re is a pure-play Bermuda-based reinsurance business
with global reach. Conduit Reinsurance Limited is licensed by the
Bermuda Monetary Authority as a Class 4 insurer. A.M. Best has
assigned a Financial Strength Rating of A- (Excellent) and a
Long-Term Issuer Credit Rating of a- (Excellent) to Conduit
Reinsurance Limited. The outlook assigned to these ratings is
stable.
Conduit Holdings Limited is the ultimate parent of Conduit
Reinsurance Limited and is listed on the London Stock Exchange
(ticker: CRE). References to "Conduit" include Conduit Holdings
Limited and all of its subsidiary companies.
Learn more about Conduit Re:
Website: https://conduitreinsurance.com/
LinkedIn: https://www.linkedin.com/company/conduit-re
Important information (disclaimers)
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements may be identified by the use of forward-looking
terminology, including the terms "believes", "estimates", "plans",
"goals", "objective", "rewards", "expectations", "projects",
"anticipates", "expects", "achieve", "intends", "tends", "on
track", "well placed", "estimated", "projected", "may", "will",
"aims", "could" or "should" or, in each case, their negative or
other variations or comparable terminology, or by discussions of
strategy, plans, objectives, goals, targets, future events or
intentions. Forward-looking statements include statements relating
to the following: (i) future capital expenditures, expenses,
revenues, unearned premiums pricing rate changes, terms and
conditions, earnings, synergies, economic performance,
indebtedness, financial condition, dividend policy, claims
development, losses and loss estimates and future business
prospects; and (ii) business and management strategies and the
expansion and growth of Conduit's operations.
Forward-looking statements may and often do differ materially
from actual results. Forward-looking statements reflect Conduit's
current view with respect to future events and are subject to risks
relating to future events and other risks, uncertainties and
assumptions relating to Conduit's business, results of operations,
financial position, liquidity, prospects, growth and strategies.
These risks, uncertainties and assumptions include, but are not
limited to: the possibility of greater frequency or severity of
claims and loss activity than Conduit's underwriting, reserving or
investment practices have anticipated; the reliability of
catastrophe pricing, accumulation and estimated loss models; the
actual development of losses and expenses impacting estimates for
claims which arose as a result of recent loss activity such as the
Ukraine crisis, Hurricanes Ian and Ida, the European storms and
floods in 2021 and 2022 and the earthquake in Turkey; the impact of
complex causation and coverage issues associated with attribution
of losses to wind or flood damage; unusual loss frequency or losses
that are not modelled; the effectiveness of Conduit's risk
management and loss limitation methods, including to manage
volatility; the recovery of losses and reinstatement premiums from
our own reinsurance providers; the development of Conduit's
technology platforms; a decline in Conduit's ratings with A.M. Best
or other rating agencies; the impact that Conduit's future
operating results, capital position and ratings may have on the
execution of Conduit's business plan, capital management
initiatives or dividends; Conduit's ability to implement
successfully its business plan and strategy during 'soft' as well
as 'hard' markets; the premium rates which are available at the
time of renewals within Conduit's targeted business lines;
increased competition on the basis of pricing, capacity or coverage
terms and the related demand and supply dynamics as contracts come
up for renewal; the successful recruitment, retention and
motivation of Conduit's key management and the potential loss of
key personnel; the credit environment for issuers of fixed maturity
investments in Conduit's portfolio; the impact of swings in market
interest rates, currency exchange rates and securities prices;
changes by central banks regarding the level of interest rates and
the timing and extent of any such changes; the impact of inflation
or deflation in relevant economies in which Conduit operates;
Conduit becoming subject to income taxes in the United States or in
the United Kingdom; and changes in insurance or tax laws or
regulations in jurisdictions where Conduit conducts business.
Forward-looking statements contained in this trading update may be
impacted by the escalation or expansion of the Ukraine conflict on
Conduit's clients, the volatility in global financial markets and
governmental, regulatory and judicial actions, including coverage
issues.
Forward-looking statements speak only as of the date they are
made. No representation or warranty is made that any
forward-looking statement will come to pass. These forward-looking
statements speak only as at the date of this announcement. Conduit
disclaims any obligation or undertaking to update or revise any
forward-looking statements contained herein to reflect actual
results or any change in the assumptions, conditions or
circumstances on which any such statements are based unless
required to do so by law or regulation.
"Estimated ultimate premiums written" is the estimated total
gross premiums written (excluding reinstatement premiums) that is
expected to be earned assuming all bound contracts run to the end
of the period of cover, after management discount for prudence.
The Conduit renewal year on year indicative pricing change
measure is an internal methodology that management intends to use
to track trends in premium rates of a portfolio of reinsurance
contracts. The change measure reflects management's assessment of
relative changes in price, exposure and terms and conditions. It is
also net of the estimated impact of claims inflation. The
calculation involves a degree of judgement in relation to
comparability of contracts and the assessment noted above,
particularly in Conduit's initial years of underwriting. To enhance
the methodology, management may revise the methodology and
assumptions underlying the change measure, so the trends in premium
rates reflected in the change measure may not be comparable over
time. Consideration is only given to renewals of a comparable
nature so it does not reflect every contract in the portfolio of
Conduit contracts. The future profitability of the portfolio of
contracts within the change measure is dependent upon many factors
besides the trends in premium rates.
1 Estimated ultimate premiums written now exclude reinstatement
premiums to ensure consistency with the IFRS 17 view of
revenue.
2 Numbers as reported in the first quarter 2022 trading update
under IFRS 4.
3 Gross premiums written now exclude reinstatement premiums to
ensure consistency with the IFRS 17 view of revenue.
4 Numbers as reported in the first quarter 2022 trading update
under IFRS 4.
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END
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